Coal India Share Price Target at Rs 450: Sharekhan Research
Mirae Asset Sharekhan has reiterated a 'BUY' rating on Coal India Limited (CIL) with an unchanged price target of Rs. 450, citing favorable sector dynamics, attractive valuations, and robust dividend yield. Despite a muted top-line growth for Q4FY25, the company has demonstrated earnings resilience through cost efficiencies, strong operating margins, and expanding ventures like coal gasification.
Solid Quarter Despite Tepid Volume Growth
Coal India’s Q4FY25 performance was broadly in line with expectations. The company posted a consolidated revenue of Rs. 37,825 crore, up by 1.1% YoY, driven largely by moderate realizations. Volume growth remained flat with sales of 201 million tonnes (mt), a marginal decline of 0.2% YoY due to increased captive consumption and lower e-auction volumes.
The company’s operating profit (excluding overburden removal or OBR) stood at Rs. 11,229 crore, representing a 14.1% year-on-year increase, aided by reduced employee costs. EBITDA per tonne improved to Rs. 558, up from Rs. 488 last year.
Profitability Trends and Dividend Payout
Coal India’s net profit climbed to Rs. 9,604 crore, registering a 10.6% YoY growth, supported by strong other income. Adjusted operating margin improved by 337 basis points YoY to 29.7%, reflecting tighter operational control and higher efficiencies.
The company declared a final dividend of Rs. 5.15/share, bringing the total dividend for FY25 to Rs. 26.5/share, translating to a dividend yield of approximately 7%—a highly attractive feature for income-focused investors.
Revenue and Profitability Outlook
According to projections, Coal India’s revenue is expected to grow from Rs. 1.43 lakh crore in FY25 to Rs. 1.61 lakh crore by FY27, with stable EBITDA margins. Net profit is forecast to rise from Rs. 35,358 crore in FY25 to Rs. 39,963 crore by FY27.
| Metric | FY25 | FY26E | FY27E |
|---|---|---|---|
| Revenue (Rs. Cr) | 1,43,369 | 1,50,971 | 1,60,625 |
| Adjusted PAT (Rs. Cr) | 35,358 | 37,796 | 39,963 |
| Adjusted EPS (Rs.) | 57.4 | 61.3 | 64.8 |
| P/E (x) | 6.7 | 6.2 | 5.9 |
Sector Tailwinds: Thermal Power and Energy Security
India's demand for coal is projected to touch 1,250–1,500 million tonnes by FY2030, underpinned by rising electricity consumption and industrial growth. Despite the government's push for renewable energy, coal will continue to remain a primary fuel source in the country’s energy mix.
Moreover, the government's plan to add 80 GW of new thermal capacity by FY32 provides a significant demand buffer. CIL, accounting for about 55% of India’s commercial energy production, stands to benefit from these tailwinds.
Strategic Foray into Coal-to-Chemicals
A noteworthy development is the creation of Coal Gas India Limited, a new subsidiary in collaboration with GAIL, aimed at expanding into the coal-to-chemicals segment. This move aligns with long-term sustainability goals and enhances revenue diversification.
This diversification not only reduces dependence on thermal coal but also strengthens Coal India’s position in emerging energy technologies.
Valuation: A Discount to Fundamentals
Currently trading at a P/E of 6.2x FY26E EPS, Coal India appears attractively valued considering its balance sheet strength, robust cash flows, and dividend yield. The stock has corrected nearly 25% from recent highs, primarily due to subdued volume growth. However, the current valuation is compelling for long-term investors seeking exposure to India's energy sector.
Risks and Headwinds
While the overall outlook remains positive, investors should monitor the following:
- Volume Risks: Slower-than-expected coal offtake or delays in thermal capacity additions could weigh on earnings.
- Realization Risk: Any drop in e-auction prices or regulatory caps on realizations could impact margins.
- Transition Risk: Aggressive energy transition policies may gradually reduce coal’s share in the energy mix.
Shareholding and Liquidity Snapshot
Promoters (Government of India) retain a strong 63.1% stake, while DIIs and FIIs hold 23.4% and 7.7%, respectively. The free float remains healthy, enhancing liquidity for institutional participation.
Sharekhan Research Maintains BUY with Rs. 450 Target
Coal India’s near-term concerns on volumes are overshadowed by its long-term strategic advantages, diversified operations, and unmatched scale. The valuation remains attractive at current levels, backed by strong cash flows, a resilient balance sheet, and consistent dividends.
Mirae Asset Sharekhan has reiterated its BUY call with a price target of Rs. 450, reflecting a significant upside from current levels. The brokerage anticipates that improving realizations, volume recovery, and policy tailwinds will anchor the stock’s re-rating over the next 12–18 months.
